Accounting Exam 3

If a company purchased 275 units of inventory at $16.50 per unit and 450 units at $17.50 per unit, its weighted average unit cost for this inventory would be: -$16.50 -$17.00 -$17.12 -$17.50

$17.12 (16.50 x 275) + (17.50 x 450) / (275+450)

A company sells goods on account at a selling price of $20,000. The cost of the goods is $15,000. Under a perpetual inventory system the journal entries to record the sale will include: $20,000 will be debited to Inventory and $20,000 will be credited to Accounts Receivable. $20,000 will be debited to Cost of goods sold and $20,000 will be credited to Inventory. $15,000 will be credited to Inventory and $15,000 will be credited to Sales. $20,000 will be debited to Accounts receivable and $20,000 will be credited to Sales.

$20,000 will be credited to Sales.

* A company purchased $22,000 of merchandise. Transportation costs were an additional $260. The company returned $330 of the merchandise and then paid the invoice within the 3.0% discount period. What is the total amount of cash paid? (Round your answer to the nearest dollar amount.) $22,260 $21,270 $21,280 $21,272

$21,280 $22,000 − $330 = $21,670 Discount = $21,670 × 0.03 = $650.1 $21,670 − $650.1 + $260 = $21,279.9

* Plasma Inc., has net credit sales of $620,000 during the year. Based on historical information, Plasma estimates that 5% of net credit sales result in bad debts. At the beginning of the year, Plasma has a credit balance in its Allowance for Doubtful Accounts of $5,200. What amount of bad debt expense should Plasma recognize for the year, assuming no specific customer accounts were written off? -$31,000. -$25,800. -$5,200. -$36,200.

$31,000. When the % of credit sales method is used, the amount of the entry to record Bad Debt Expense is based on the historical % of bad debt losses and is not adjusted for any balance in the allowance for doubtful accounts.

* Purrfect Pets has a facility that originally cost $445,000. The balance of the accumulated depreciation account for the facility is $204,000. The company expects to be able to sell the facility for $107,000 at the end of its useful life. The depreciable cost of the facility is: $97,000. $338,000. $241,000. $107,000.

$338,000. Depreciable Cost = Cost - Residual Value Depreciable Cost = $445,000 - $107,000 Depreciable Cost = $338,000

A company expects to use equipment that cost $68,000 for eight years and then sell it for $6,800. Using the straight-line method, the company should report depreciation for the equipment of: $17,425 per year. $15,300 per year. $7,650 per year. $8,500 per year.

$7,650 per year. (68000-6800)/8

A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The number of issued shares after these transactions have been accounted for is: 12 million shares. 9 million shares. 10 million shares. 17 million shares.

12 million shares.

A company's sales in 2013 are $360,000 and in 2014 sales are $445,000. The percentage change is: 1.2% 19.1% 23.6% 81.0%

23.6% (445000-360000)/360000

* During 2013, Shockglass Company recorded inventory purchases of $120,000 and cost of goods sold of $65,000. If inventory at the beginning of the year was $22,500, the ending inventory balance must have been: $33,500. $77,500. $32,500. $34,500.

4455 Net sales = Sales revenue − Sales discounts $4,455 = $4,500 − $45 Sales discounts = $4,500(1/100) = $45

Merchandise costing $2,850 is sold for $4,500 on terms 1/10, n/30. If the buyer pays within the discount period, what amount will be reported on the income statement as net sales? $1,650 $4,500 $3,075 $4,455

4500

Coca-Cola reported net sales revenues of $22.2 billion and cost of goods sold of $10.6 billion. Its gross profit percentage was (closest to): -7.2 % -47.7%. -52.3%. -56.1%.

52.3%. [(22.2-10.6)/22.2] x 100

On April 6, Lopez Co. purchased $5,000 of merchandise, terms 1/15, n/30. Lopez Co. paid for the purchase on April 26. The entry to record the payment on April 26 in a perpetual inventory system includes which of the following? A credit to inventory for $50. A debit to accounts payable for $4,900. A credit to accounts payable for $5,000. A credit to cash for $5,000.

A credit to cash for $5,000.

Which of the following is the equation for cost of goods sold? -Beginning inventory + net purchases - Ending inventory -Beginning inventory + net purchases + Ending inventory -Net purchases - Ending inventory -Ending inventory + net purchases - Beginning inventory

Beginning inventory + net purchases - Ending inventory

*Which of the following would be classified as a financing activity on the statement of cash flows? -Cash receipts from accounts receivable collections. -Cash receipts from sale of equipment. -Cash paid to purchase treasury stock. -Cash receipts from short-term notes receivable.

Cash paid to purchase treasury stock. Financing activities include cash inflows and outflows from issuing/repurchasing stock, and issuing/repaying long-term debt.

*Judging only from the ratios below, which of the following clothing wholesalers is least likely to be having cash flow problems? Company A Company B Company C Company D

Company C Company C has the highest receivables turnover and the highest inventory turnover which means the company is selling its inventory quicker and collecting its receivable more quickly than the other companies.

*Which inventory costing method generally results in the most recent costs being assigned to ending inventory? LIFO. FIFO. Weighted average cost. Simple average cost.

FIFO FIFO uses the oldest costs first in calculating cost of goods sold, so that leaves the most recent costs for ending inventory.

*Which one of the following statements regarding sales discounts is true? -If a company offers a discount to encourage prompt payment and the discount is taken, the discount reduces the amount of Net Sales. -Credit terms of "2/10, n/30" mean that if payment is made in two days, a 10% discount may be taken; if not paid within two days, the full invoice price will be due in thirty days. -The terms "sales discounts" and "sales credits" are used interchangeably by a company. -Sales discounts is an expense account.

If a company offers a discount to encourage prompt payment and the discount is taken, the discount reduces the amount of Net Sales. Sales discounts are subtracted in calculating Net Sales. Credit terms of "2/10, n/30" mean that a 2% discount is offered if payment is made within 10 days, otherwise the gross amount is due in 30 days. Sales discounts are from a seller's perspective; purchase discounts are from a purchaser's perspective. Sales discounts is a contra-revenue account.

*Net Income

Is the starting point for calculating operating cash flows with the indirect method.

If an analyst wants to examine a company's short-run ability to survive, which of the following would best be considered? -Liquidity. -Market share. -Profitability. -Solvency.

Liquidity.

A trucking company sold its fleet of trucks for $55,800. The trucks had originally cost $1,446,000 and had accumulated depreciation of $1,277,000 through the date of disposal. What gain or loss did the trucking company record when it sold the fleet of trucks? -Gain of $55,800. -Loss of $113,200. -Loss of $55,800. -Gain of $113,200.

Loss of $113,200. (1446000-1277000) - 55800

*Free Cash Flow

Positive net cash flows in excess of property, plant and equipment replacement and dividends.

Which of the following statements regarding ratios is true? -All other things being equal, a lower debt-to-assets ratio indicates a riskier financing strategy. -A lower asset turnover ratio is a favorable indicator of how efficiently a company is utilizing its resources. -The net profit margin ratio cannot be used to indicate how well a company is controlling its expenses. -Ratios can be used to compare companies of different sizes.

Ratios can be used to compare companies of different sizes.

*Which of the following statements regarding cash flows from investing activities is true? The proceeds from sales of investments are reported as cash inflows from investing activities. Cash flows from investing activities are calculated by making adjustments to net income. Cash paid to acquire long-lived assets is reported as a cash inflow from investing activities. Cash received from issuing a long-term payable is reported as a cash inflow from investing activities.

The proceeds from sales of investments are reported as cash inflows from investing activities. Cash flows from investing activities are the cash inflows and outflows related to the purchase and sale of investments and long-lived assets.

A company sells 1 million shares of common stock with a par value of $0.07 for $15.50 a share. To record the transaction, the company would: -debit Cash for $70,000, debit Capital Receivable for $15,430,000, credit Common Stock for $70,000 and credit Additional Paid-in Capital for $15,430,000. -debit Cash for $15.50 million and credit Common Stock for $15.50 million. -debit Cash for $15.50 million, credit Common Stock for $70,000 and credit Additional Paid-in Capital for $15,430,000. -debit Cash for $70,000 and credit Common Stock for $70,000.

debit Cash for $15.50 million, credit Common Stock for $70,000 and credit Additional Paid-in Capital for $15,430,000.

On the payment date for a dividend, the company: debits Dividends Declared and credits Dividends Payable for the amount of the dividend. debits Dividend Expense and credits Cash for the dividend amount. debits Dividends Payable and credits Cash for the dividend amount. establishes who will receive the dividend payment.

debits Dividends Payable and credits Cash for the dividend amount.

If a company that uses a perpetual inventory system sold merchandise which cost $1,000 for a selling price of $3,000, the accounting equation would show a: net increase in assets and net increase in stockholders' equity. net increase in assets and net decrease in liabilities. net decrease in assets and net increase in liabilities. net decrease in assets and net decrease in stockholders' equity.

net increase in assets and net increase in stockholders' equity.

At the end of last year, Cessa Company had total assets in the amount of $4,000,000 and total liabilities in the amount of $3,000,000. The company sold stock to new stockholders for $1,000,000. As a direct result of this transaction, the: the debt-to-assets ratio will decrease. asset turnover will increase. net profit margin will increase. net profit margin will decrease.

the debt-to-assets ratio will decrease.